Working on the right end of Supply Chain Improvement



In the world of business; we know that it is the series of links from the supplier to the customer which have to be synced to make you viable in the future. The performance of these links determine the overall performance of the Supply Chain in turn the Organizational Performance.

Supply Chains undertake improvement initiatives by adopting the Best Practices & Tools coupled with their Techniques ranging from Lean to BPR to incremental performance improvement initiatives. These initiatives are typically led & driven by the OEM or the Manufacturing link of the Supply Chain. 

While I work & observe such initiatives, i find them to be really energetic, in certain cases led by a business case of the Supply Chain function indicating the improvement impact of the initiative on the Organization & a lot of that. Many a times the result of these improvement initiatives is reduction in inventory, improved quality, higher OTD from the Supplier & in general better P&L/Balance Sheet of the OEM. 
Question is - Can Improvement in the performance of the link of the Supply Chain at the stage of the OEM/Manufacturer truly result in improvement of the overall Supply Chain? 
 
As we know with chains, “the strength of the chain is only as good as the weakest link of the chain”. Many a times the weakest link of the chain is never the OEM/Manufacturing Organization. It is in many instances the Suppliers of theirs. So an improvement at the OEM/Manufacturer (intra-organisational supply chain) is like working on strengthening the strong link leaving the weak link further stresses. This is normally depicted in system demand on the Supply side of the OEM or in certain cases leads to transferring the 'buffers' out of the OEM premises to the Supplier end. 

An improvement in the stronger link (i.e. the OEM/Manufacturing link) will not improve the strength of the Supply Chain. Viewing it analytically the weakest link is going to determine the overall performance of the end to end Supply Chain. So the Supply Chain improvement initiative needs to improve the weaker(st) link to ensure that the overall strength of Supply Chain improves leading to the Supply Chain enhancing its competitiveness.

Comments

  1. Pravin Maheshkar (Business excellence) HZLMay 10, 2013 at 10:12 AM

    we need to have a balanced approach justifying the strengthning of SCM.The deciding factors will vary case to case..................

    ReplyDelete
  2. UnknownMay 10, 2013 at 10:59 AM

    Pinak,
    Excellent thoughts !
    We faced this situation in EPC business, where most of your raw material / components are outsourced.
    The critical decision here is to find out the weakest link. Coming down to the 'real' and 'real' root cause of inefficiency / problem is important. many a times one element (link) of supply chain feels others should improve, without collectively looking at the facts.( A typical human tendency !).All the stakeholders should do a mature introspection and analysis before deciding the 'weakest link'.
    Thanks for initiating the discussions

    ReplyDelete

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